Insight: Market watchers fret about future of US wholesale power markets

US power markets are in the spotlight amid a flurry of power plant retirements and subsequent efforts by various forces to keep them afloat. Some market watchers suggest the shifts in market structure, resource mixes and policy sets should come as no surprise – and that perhaps the country’s experiment with competitive wholesale markets should be abandoned – while others believe that power markets will persevere and even expand. US power markets were restructured in the 1990s to introduce more market-based competition and separate monopolies many utilities had on the value chain, from generation to transmission and local delivery. But in recent years, the merchant power generation model, in which generators earn profits by selling energy and capacity in wholesale markets, has come under threat – with coal and nuclear particularly hard hit. Squeezed by abundant shale gas and the growth of renewables, coal plants have been shutting at a rapid clip, with 46.5 GW having retired between 2013 and 2018. That total does not include permanent conversions to natural gas, which might account for about an additional 10 GW, according to S&P Global Platts Analytics. In addition, 4.8 GW of nuclear capacity has retired over the same timeframe. On… continue reading